In the US, there are approximately 150,000 dentists practicing in 120,000 dental offices scheduling over 550 million patient visits and performing over 1 billion dental procedures, resulting in $102 billion in dental services. Gross billings for general dental practitioners (GP) and specialists average on the order of $650,000 and $800,000, respectively. The GP with one hygienist schedules an estimated 4,000 patients visits per year and the specialist with a hygienist sees 5,250 patients annually.
Research reports show that billing for dental services increased from approximately $90.5 billion in 2006 to approximately $102 billion in 2009. Of the $102 billion, approximately $95.4 billion was provided from private sources and the remaining approximately $6.5 billion paid for by public funding. Private sources for financing dental expenditures are derived from patient out-of-pocket payments (approximately $45 billion) and private health insurance (approximately $50 billion). The average dental insurance claim to a private insurer is estimate to be $160.
The largest provider of dental insurance is Delta Dental. In 2007, Delta Dental served over 25% of the estimated 173 million Americans with dental insurance, providing national dental coverage to over 51 million. Delta Dental member companies processed over 76 million dental claims in 2007. In the US, it is estimated that over 300 million dental insurance claims are submitted annually for $57 billion of reimbursement via private insurance and public funding for dental services (approximate average of $160 per dental claim). There are hundreds of large and small companies providing dental insurance coverage.
Dental and medical offices are surprisingly diversified and multi-functional from the perspective of administrative and business processes in the delivery of dental and medical services. However, dental offices, for example, have underinvested in technology and human resources to streamline financial and accounting transactions relating to billing and collecting for dental services as well as offering patients opportunities to finance dental procedures, and thus increase dental revenues for the dentist. Dental offices must integrate a number of business processes to maintain or build a dental practice ranging from marketing the dental practice, to interfacing with dental laboratories for prosthetics, to billing and collecting for dental services. In the latter and as mentioned above, dental offices are confronted with the complexities of collecting payments from patients for the delivery of dental services. Frequently, dentists and their offices lack the infrastructure and/or know-how to (1) price and collect payments for dental services, (2) offer and administer financing options for patients, and (3) invoke working capital and cash management strategies to maximize practice cash flows. With the continuous evolution of new dental technologies facilitating more advance dental procedures with positive clinical outcomes, creates additional challenges from the perspective of patient financial acceptance of these typically costly dental procedures. It is believed that 75% of patients find it difficult to write a check for $500 at a dental appointment. A number of providers of consumer debt offer financing products to patients through dental practices, however, dental offices often find these products difficult to integrate into the practice flow, i.e., paper intensive and difficult to administer. It is interesting to note that patients with dental insurance are far more likely to accept more advance and costly dental procedures.
Dental insurance is a complicated task for dental offices, many of which are not equipped and/or have the human resource capacity to efficiently process dental claims for the patient and, at times, take this form of payment as full or partial payment for dental services provided. FIGS. 1A and 1B described below (referred to collectively as FIG. 1) characterize the dental insurance revenue cycle. The patient is scheduled for an appointment, examined by the dentist, presented with a treatment plan, and/or treatment or services are delivered by the dentist. If the patient has insurance, either (1) the dental office can process the claim as full or partial payment when dental services rendered or (2) direct the patient to pay for the dental services delivered and instruct the patient file to file his/her claim with the dental insurance company.
Processing a patient's dental insurance is a complex process that requires knowledge and a skill set of dental insurance claim process and the supporting technology to file and reconcile the claim back to the patient's account within the dentist's practice management system in general and, in particular, the business rules of specific dental insurance policies. The dental insurance reimbursement process adopted by many dental offices uses paper as the submission medium, which is slow and labor intensive, often resulting in incorrect submissions and/or long reimbursement cycles. Dental insurance claim processing by dental offices is inefficient and paper intensive, using paper submissions to payers via US mail with reimbursement by check sent to the provider by US mail. Today, there are a number of companies offering electronic services for the dentist to electronically submit dental insurance claims to the dental insurance plans (payer), however, payments and supporting documentation detailing the services reimbursed by the dental insurance plan are paper and mailed to the dentist. The cost to process claims using paper is an expensive process that takes time and is often inaccurate secondary to human error. It is known that many dental offices generally lack a complete knowledge of the many business rules underlying insurance reimbursement of dental procedures as well as the infrastructure and processes to accurately file a dental insurance claim with the patient's dental insurance plan and receive and post payment from the dental insurance plan to the patient's account balance within the dentist's practice management system.
FIG. 1A is a block diagram of the conventional dental insurance revenue cycle under the prior art. FIG. 1B is a flow diagram of a dental insurance reimbursement cycle under the prior art. After delivery of dental services, the dental insurance revenue cycle is initiated with the dental office completing a dental claim form having the patient's name, address, insurance carrier, name of the provider, and dental procedures performed. The claim is submitted to the payer, or an intermediary such as a dental clearinghouse which then submits the claim to the payer. The payer reviews the claim and determines to adjudicate the claim by paying it in full with supporting documentation, partial pays the claims and sends supporting documentation explaining partial payment, or rejects the claim with supporting documentation for denial or no payment. Payment in the form of a check is typically sent to the provider via US mail along with the supporting documentation detailing the services that were reimbursed by the dental insurance plan. The temporal range of the dental insurance revenue cycle ranges from approximately 20 days for simple claims to more than 90 days or more for complex, delayed, or incorrectly filed claims. Many dental offices have aged dental insurance receivables greater than 60 days due to a number of factors including but not limited to complex and complicated business rules for insurance reimbursement, clerical errors, delays due office understaffing, and inefficient claim processing and posting (paper submissions).
Many times patients want to accept dental treatment plans proposed by dentists, but find it difficult to pay for these services. On the other hand, dentist would like patients to accept and pay for dental treatment plans, but are unable to extend financing. There are many providers of consumer debt that offer financial products to patients through dental offices. For example, CareCredit markets financing options for patients through providers such as no interest, low monthly payment options, no up-front costs, no prepayment penalties, and no annual fees to the patient. These providers of consumer debt finance dental procedures based on the patient's credit worthiness. Typically, the provider of debt such as CareCredit pays the dentist on the order of 90% of the financed dental procedure and sends the patient a credit card and credit card statement reflecting the type of credit product extended. When compared to dental insurance revenue cycles for dental offices, consumer debt financing products are slightly less cumbersome to manage, however, dental offices usually only offer finance products from one or two providers of consumer debt.
It is common for patients to seek creative financing to pay for their elective or necessary healthcare procedures. In the US, for example, approximately 150,000 dentists deliver $102 billion in dental services to patients, of which approximately 50% is covered by public or private dental insurance and the remaining 50% from patient out-of-pocket costs. Many times, patients are presented with dental treatment plans that may exceed their immediate cash capacity, however, these patients are credit worthy to receive debt financing of out-of-pockets costs for their dental treatment. A patient may require, for example, dental treatment totaling $5,000 for dental services. In this example, the patient may have dental insurance that covers $1,000 of the proposed $5,000 dental treatment plan, leaving $4,000 of patient out-of-pocket costs. Many dental patients cannot immediately afford the $4,000 out-of-pocket cost for the dental treatment plan. Depending on the credit worthiness of the patient or the patient-dentist relationship, the patient may have credit extended in the form of consumer debt financing provided by a third party such as a bank or credit card company, or the dentist may elect to finance some or all of the proposed $4,000 in out-of-pocket costs for the dental treatment plan.
There are numerous credit card companies and providers of consumer debt (PCD) financing companies offering finance products to healthcare patients wanting or needing credit to pay for out-of-pocket costs for healthcare treatment. In the dental market segment, for example, there are many PCD financing companies such as CareCredit, Citi Health, Wells Fargo Financial, MedChoice, and Chase Health Advantage. FIGS. 2 and 3 are flow diagrams for conventional patient financing for healthcare procedures, as known in the art. Using the dental treatment example described above, and with reference to FIG. 3, the dental office (or dentist) can submit a credit application to CareCredit for the patient in the amount of $4,000. Credit applications used by PCD financing companies for healthcare treatment generally request the patient name, address, social security number, employment, information, and amount of the medical or dental procedure or treatment plan to be financed. The PCD financing companies provide their specific credit application form (CAF) for healthcare providers to use. In the case of CareCredit, for example, it provides a paper CareCredit CAF requesting the patient name, address, social security number, employment, and co-application information. The patient completes and signs the paper CareCredit CAF. The dental office (or healthcare provider) submits the CAF via facsimile or email (the paper CAF is converted to a PDF file that is attached to an email) to CareCredit.
Upon receipt of the CAF, CareCredit would use the patient's information provided on the CAF and request the patient's FICO score from credit bureaus such as Equifax, Experian, and/or TransUnion (a FICO score is a measure of credit risk). Using the FICO score and the amount to be financed, CareCredit would determine the credit worthiness of the patient in rendering a decision to extend credit. CareCredit then returns a decision via facsimile or return email of whether or not to extend credit to the patient. If credit is extended to the patient, the dental treatment plan is started, CareCredit sends payment to the dental office, and the patient would receive a CareCredit statement for payment.
A credit score in the United States is a number representing the creditworthiness of a person or the likelihood that person would pay his or her debts. The credit score has been demonstrated to be very predictive of risk and, therefore, has made credit more widely available to consumers and lowered the cost of providing credit. A credit score is primarily based on a statistical analysis of a person's credit report information, typically from the three major American credit bureaus, namely Equifax, Experian, and TransUnion. Lenders, such as banks and credit card companies, use credit scores to evaluate the potential risk posed by lending money to consumers and to mitigate losses due to bad debt. Using credit scores, lenders determine who qualifies for a loan, at what interest rate, and to what credit limits. Because a score does not consider race, sex or ethnicity, it is generally considered to be the most fair and objective underwriting tool available to lenders. The Federal Reserve Board did a study that noted scores have increased the availability of credit and reduced the cost of credit. Scores have also proven to be very predictive in assessing risk.
Credit scores are designed to measure the risk of default by taking into account various factors in a person's financial history. Although the exact formulas for calculating credit scores are closely-guarded secrets, FICO has disclosed the following components and the approximate weighted contribution of each:
1. Payment history (35% contribution to scoring) includes late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer's FICO score to drop. Paying bills timely should improve a FICO score.
2. Credit utilization (30% contribution to scoring) is the ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts may adversely affect this ratio and therefore have a negative impact on their FICO score.
3. Length of credit history (15% contribution to scoring).
4. Types of credit used (10% contribution to scoring) such as installment, revolving, and consumer finance.
5. Recent search for credit and/or amount of credit obtained recently (10% contribution) includes multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual's score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual's score. However, individuals shopping for a mortgage or auto loan over a short period would likely not experience a decrease in their scores as a result of these types of inquiries.
A FICO score ranges between 300 and 850, with 300 being a poor score and high credit risk whereas, and 850 being a good score and low credit risk. Generally, aggregate consumer FICO scores exhibit a left-skewed distribution with 60% of scores near the right between 650 and 799. According to FICO the median score is 723. The performance of the scores is monitored and the scores are periodically aligned across scorecards within each scoring model, as well as across the three credit bureaus, so that the score represents the same credit risk to lenders regardless of its source. Each individual actually has three credit scores for the FICO scoring model because the three national credit bureaus, Experian, Equifax and TransUnion, each have its own database. Consequently, data about an individual consumer can vary from bureau to bureau.
Returning to the $4,000 in out-of-pocket patient costs in the dental treatment plan example above, CareCredit would seek the patient's FICO score by submitting at least the patient's name, address, and social security number (garnered from the paper CAF) to the national credit bureau(s). If more than one FICO score is procured from more than one credit bureau, these FICO scores can be averaged or an acceptable range set by CareCredit. CareCredit, for example, may have a minimum acceptable FICO score threshold of 700 for financing of dental procedures under $10,000. FIG. 4 shows an example profile of the variation in acceptable credit scores among PCD financing companies, as know in the art. Generally, patients with lower FICO scores that are extended credit may have credit terms that reflect the risk (discount to dentist and/or high interest rate) corresponding to the amount of credit extended to them.
As such, if the patient's FICO score, for example, is 675, then the patient may not be approved for credit for some providers of consumer debt. If, on the other hand, the patient's score is 750, he/she may be approved for credit and have the $4,000 out-of-pocket cost of the dental procedure covered by CareCredit by extending credit to the patient. If approved, for example, CareCredit would forward $4,000 to the dentist less any fees such as transaction fees, prepaid interest, etc., thus netting the dentist for example $3,600. As such, $400 was held back by CareCredit for the cost such as processing and cost of financing. In turn, CareCredit may have a consumer finance product that extends the patient interest free financing for one year for example. Nonetheless, the patient secured financing for the $4,000 out-of-pocket costs for the dental procedure and the dentist delivers a dental service to the patient.
In the event the patient's FICO score (for example 675) is below the acceptable threshold level of CareCredit (assume CareCredit is Company 3 and the acceptable FICO score is 700 for the example above) and CareCredit rejects the patient's CareCredit credit application, then the dental office may restart the credit application process, pursue alternative financing, or not deliver dental treatment because of lack of financing (see FIG. 3). More specifically, if the patient elects to submit another application to a PCD financing company, the patient then completes a CAF for a second PCD financing company and the dental office submits the credit application to the second PCD financing company (FIG. 3). Since a portion of the FICO credit score has a component tied to the number of times the FICO score is search by PCD financing company, submitting additional credit applications and procuring the patient's credit score from a credit bureau(s) may have an adverse affect on the patient's FICO score. In addition, the dental office has to start the credit application process, which is time consuming.